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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 39E: (Appendix 11A) Manufacturing Cycle Efficiency Kurena Company provided the following information on...

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Question 9.4

Cavendish Cheese Company makes three products within their single facility. Data concerning these products follow:

	Products
	A	B	C
Selling price per unit	$67.90	$57.70	$43.90
Direct materials	$12.10	$10.30	$8.60
Direct labour	$14.10	$8.00	$6.80
Variable manufacturing overhead	$2.60	$2.20	$1.80
Variable selling cost per unit	$2.50	$2.20	$2.50
Mixing minutes per unit	2.70	3.30	4.70
Monthly demand in units	1,000	3,000	3,000

The mixing machines are potentially a constraint in the production facility. A total of 25,800 minutes are available per month on these machines.

Direct labour is a variable cost in this company.

Submission Instructions:

How many minutes of mixing machine time would be required to satisfy the demand for all three products?
How much of each product should be produced, rounded to the nearest whole unit, to maximize operating income?
Up to how much should the company be willing to pay, rounded to the nearest whole cent, for one additional minute of mixing machine time if the company has made the best use of the existing mixing machine capacity?

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